By Patrick Githinji
The announcement by Finance Minister Uhuru Kenyatta to formalise leasing of vehicles and equipment will save the exchequer billions of shillings, players in the leasing industry have said.
Vehicle leasing solutions provider, Simba Colt Motors, said it will encourage more firms to adopt leasing for their fleets.
It will also spur growth of the local motor industry, said the firm.
Simba Colt Motors Chief Executive Officer Adil Popat said the Government could save more than 30 per cent of its resource allocation for new motor vehicles.
"As the major player in motor vehicle leasing in Kenya, Simba Colt Motors welcomes the move by the Government to adopt motor vehicle leasing solutions in a move that will undoubtedly help spur the local motor industry," said Popat.
"It’s particularly encouraging to note that the Government has commited to jump-start this process and act as a lessee in a move that will have a major multiplier effect even in the private sector."
In his budget speech, last week, Finance Minister Uhuru Kenyatta, announced that the Government would remove withholding tax on lease rentals and also adopt vehicle leasing solutions.
Fleet outsourcing through a leasing solution helps to reduce the risk and complexity associated with motor vehicle management.
"Other benefits include eliminating asset and maintenance risks, flexibility of fleet composition, reduced administrative burden and ensuring a modern fleet that is fit for particular purposes," Popat explained.
"We have made progress in encouraging leasing in our country, we recognise more still needs to be done to promote leasing for faster growth and employment," said Uhuru.
"Starting FY2010/11, the Government will adopt leasing and mortgage as a vehicle for providing cheaper access to assets necessary for enhancing service delivery," added the minister.
"Through this process, the Government would be able to unlock resources to frontload financing of critical public services and development, especially provision of housing and vehicles to the disciplined forces."
Paul Njeru of Vehicle and Equipment Leasing Limited (VAELL), said the Government’s move will save up to 70 per cent on its new vehicles purchase budget, estimated annually at about Sh5 billion.
Further savings will, however, be earned by the exchequer in zeroed maintenance and repairs costs — which are usually a responsibility of leasers.
"Towards an inclusive and more sustainable rapid growth", the Government would adopt leasing and mortgage as a vehicle for providing cheaper access to assets, said Uhuru.
Kenya joins a number of nations, including South Africa, Ghana, Egypt and Libya that have adopted leasing as a way to cut costs and unlock resources otherwise tied in the case of purchase. The model is also popular in the US and Europe.
Other dealers that offer leasing services include Toyota East Africa and GM East Africa.
Players in the leasing industry, however, feel that Kenya needs much more to promote the sector.